BHP Billiton CEO meets with shareholder Elliott

RobbM. Stewart

MELBOURNE, Australia-- BHP Billiton Ltd. Chief Executive Andrew Mackenzie met Wednesday with representatives from Elliott Management Corp., the activist investor pushing for the resources company to shed at least some of its oil-and-gas assets and boost shareholder returns.

The talks took place at a mining-and-metals conference in Barcelona, a day after Mr. Mackenzie told an audience there the company was confident a strategy of cutting costs and unlocking latent production capacity could boost the value of the company by up to 50%.

After the meeting, an Elliott spokesman said the meeting was private but constructive. A BHP spokesman declined to describe the meeting beyond calling it private.

The New York hedge fund has revised its attack on BHP in the past two days, giving up on its demand that the company abandon its dual U.K.-Australia structure. But Elliott still says BHP is a chronic underperformer and must spin off its U.S. oil business and adopt a consistent plan of buying back shares.

It first approached the mining-and-energy company last year, and has over the past month been seeking support among other shareholders for its proposals.

On Tuesday, Elliott said there was broad support among investors for a restructuring of BHP's petroleum business and general agreement that there should be a renewed focus on capital returns.

BHP has said it would review the plans and respond. It rejected Elliott's suggestions it was misleading in its earlier response and that it wasn't open to suggestions.

In his speech on Tuesday, Mr. Mackenzie said the petroleum business was core to BHP's growth plans but he acknowledged the company had overpaid and invested aggressively to build a position in the U.S. onshore shale sector. The company has pivoted back toward conventional oil-and-gas production and while the shale business now expected competitive returns, BHP was open to discussing a sale of the assets, he said.

Elliott has a reputation for slowly grinding away at companies to push through changes.

In a shift, its plans now call for BHP to remain incorporated in Australia and to retain full Sydney and London listings, as well as Australian headquarters and a full Australian tax residence. That appears to address concerns in Australia after Treasurer Scott Morrison said any move to the U.K. would be contrary to the country's interest and would breach orders put in place by the government more than 15 years ago with the merger of Australia's BHP Ltd. and London-listed Billiton PLC that required a listing on the Australian Securities Exchange.

Elliott instead said BHP's management should work harder to find a solution to the legacy structure. It also conceded there were other options for the oil-and-gas assets and called on the company to launch an in-depth, independent review of its entire petroleum division.

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